Interoperability agreements signed between UK clearer LCH.Clearnet Limited and other central counterparties (CCPs) have come to a standstill because of objections from regulators.
In a message to members yesterday, LCH said that the master clearing link agreements it had signed with the other CCPs had been submitted to the relevant regulators for non-objection, but the regulators raised concerns, in particular about inter-CCP margin requirements. The clearer added that it had not been possible to obtain full details of the concerns, and that the regulators were reviewing the agreements. LCH declined to comment on which regulators had raised the objections.
LCH said that while its only currently active interoperability arrangement, with Swiss CCP SIX x-clear for trades executed on the London Stock Exchange, will not be affected for the time being, it would not be possible to offer interoperable clearing to any further trading venues until regulatory non-objection had been obtained.
LCH had agreed to interoperate with a range of clearers, including pan-European CCPs European Multilateral Clearing Facility (EMCF), EuroCCP and Norwegian post-trade provider Oslo Clearing. The agreement with EMCF initially covers Swiss and UK stocks and was due to come into force on 2 November.
As a result of the deals, LCH will be available as an alternative CCP for a variety of trading platforms, including Chi-X Europe, Nasdaq OMX Europe and BATS Europe, which clear through EMCF, and Turquoise and NYSE Arca Europe, which clear through EuroCCP.
“Following the announcements today from EMCF and LCH.Clearnet Limited concerning the delay in introducing interoperable services, Chi-X will be unable to introduce LCH.Clearnet Ltd as part of its post trade model until further notice,” said a market notice from Chi-X Europe.